Home › Circulars › RBI/2021-22/48

RBI allows banks to lend to FPIs for G-sec margin payments

Current · Source: Reserve Bank of India · RBI/2021-22/48 · issued 04 Jun 2021 · ~1 min read

Quick answerRBI now permits AD Category-I banks to lend to Foreign Portfolio Investors for placing margins with CCIL on government securities transactions, effective immediately under FEMA regulations.

The rule, in the simplest words

Banks with AD Category-I licence can lend to Foreign Portfolio Investors (FPIs) for margin payments to CCIL for government securities transactions.
Banks must ensure compliance with FEMA and internal risk policies while lending to FPIs.
Banks must review and update their credit risk frameworks to include lending to FPIs for margin purposes.

How it plays out — a real example

Rahul, a forex & trade-finance officer in Indore, helps an FPI client by providing a loan for margin payments to CCIL for a government securities transaction. Rahul ensures that the loan is in line with the bank's credit risk management frameworks and FEMA regulations, easing the FPI's liquidity constraints and boosting their participation in government securities.

What changed

RBI has allowed banks with AD Category-I licence to extend loans to FPIs for margin payments to CCIL for government securities settlement. This follows amendments to FEMA (Borrowing and Lending) Regulations, 2018 via Notification No. FEMA 3(R)2/2021-RB dated May 24, 2021. The circular is effective from June 4, 2021.

What it means for you

Banks can now offer credit to FPIs specifically for margin requirements on G-sec trades cleared through CCIL, subject to their own credit risk frameworks. This eases liquidity constraints for FPIs and may boost foreign participation in government securities. Banks must ensure compliance with FEMA and internal risk policies while lending.

What you must do

Review and update credit risk frameworks to include lending to FPIs for margin purposes.
Ensure compliance with FEMA (Borrowing and Lending) Regulations, 2018 as amended.
Set up internal processes for margin lending to FPIs against government securities transactions.
Monitor CCIL margin requirements and align lending limits accordingly.

Who it affects

AD Category-I banks in India, Foreign Portfolio Investors (FPIs), Clearing Corporation of India Ltd. (CCIL), Authorised Persons under FEMA

❓ Common questions

Regulatory timeline

Stated effective date effective from June 4, 2021
Decoded by BankPulse 2026-06-18 08:01 IST

Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).

Can banks lend to FPIs for any purpose under this circular?

No, lending is specifically allowed only for placing margins with CCIL for settlement of government securities transactions, including Treasury Bills and State Development Loans.

What regulations govern this lending?

The lending is governed by the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018, as amended by Notification No. FEMA 3(R)2/2021-RB dated May 24, 2021.

When did this circular become effective?

The directions are applicable with immediate effect from June 4, 2021.

📜 Read the original circular — full text as issued by RBI

RBI/2021-22/48
 A.P. (DIR Series) Circular No.06
 June 4, 2021
 To
 All Authorised Persons
 Madam / Sir
 Payment of margins for transactions in Government Securities by
 Foreign Portfolio Investors 
 Please refer to Paragraph 4 of the Statement on Developmental and Regulatory Policies , issued as a part of the second Bi-monthly Monetary Policy Statement for 2021-22 dated June 04, 2021 regarding placement of margins for Government securities transactions on behalf of Foreign Portfolio Investors (FPIs). Attention is also invited to the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018 notified, vide Notification No. FEMA 3(R)/2018-RB dated December 17, 2018 , as amended from time to time, and the relevant directions issued thereunder.
 2. All transactions in government securities concluded outside the recognized stock exchanges are settled on a guaranteed basis by the Clearing Corporation of India Ltd. (CCIL) which acts as the central counter party. Based on requests received, it has been decided to allow banks in India having an Authorised Dealer Category-1 licence under FEMA, 1999 to lend to FPIs in accordance with their credit risk management frameworks for the purpose of placing margins with CCIL in respect of settlement of transactions involving Government Securities (including Treasury Bills and State Development Loans) by the FPIs.
 3. Necessary amendments to Foreign Exchange Management (Borrowing and Lending) Regulations, 2018 have been carried out, vide Notification No. FEMA 3(R)2/2021-RB dated May 24, 2021 .
 4. These Directions shall be applicable with immediate effect.
 5. The Directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/ approvals, if any, required under any other law.
 Yours faithfully
 (Dimple Bhandia)
 Chief General Manager

Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2021-22/48 · issued 04 Jun 2021. The plain-English explanation above is BankPulse’s own independent summary.

🧰 Tools — save, print, templates & related

Most relevant forCompliance Team Risk Management Corporate / Wholesale Banking RM Treasury Team / ALM Credit Manager / Underwriting Legal / Documentation & Recovery-Legal

🛠 Banker’s toolkit — checklists & reply templates →

Related circulars · Foreign Exchange (FEMA)

RBI raises cash carry limit for travellers to Rs 7,500 Rupee Value of Special Currency Basket Revised to Rs.60.897378 ECB Policy Liberalised: Cost Ceilings Removed, NBFCs & Realty Get Boost ECB: Integrated Township Exemption Removed, Cost Ceilings Tightened RBI Delegates Bank Guarantee Powers for Foreign Airlines to AD Banks

Browse all departments →

Worked example & action-note template

Example: if you are a Compliance officer at a bank this circular applies to (AD Category-I banks in India, Foreign Portfolio Investors (FPIs), Clearing Corporation of India Ltd. (CCIL), Authorised Persons under FEMA), your first concrete step on “RBI allows banks to lend to FPIs for G-sec margin payments” is: “Review and update credit risk frameworks to include lending to FPIs for margin purposes.” (RBI issued this 04 Jun 2021).

Circular: RBI/2021-22/48 -- RBI allows banks to lend to FPIs for G-sec margin payments
Issued: 04 Jun 2021
Action required: Review and update credit risk frameworks to include lending to FPIs for margin purposes.
Action required: Ensure compliance with FEMA (Borrowing and Lending) Regulations, 2018 as amended.
Action required: Set up internal processes for margin lending to FPIs against government securities transactions.
Action required: Monitor CCIL margin requirements and align lending limits accordingly.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________

Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.

💬 Banker Discussion

Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.

Loading comments…

BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly).
Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12106&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.